Amidst the fanfare surrounding high-profile green energy companies, Boralex Inc. has quietly built a formidable position in the North American renewables market. While much of the recent attention has focused on the company's success in Ontario and Quebec's recent RFPs, a deeper dive into the Q1 2024 earnings call transcript reveals a subtle but significant shift in Boralex's strategy: a strategic retreat from the cutthroat U.S. market, coupled with a laser focus on the emerging opportunities within Canada.

Boralex's disappointment in the recent New York State Energy Research and Development Authority (NYSERDA) expedited RFP isn't just a momentary setback. Patrick Decostre, President and CEO, makes it abundantly clear that Boralex will not sacrifice returns for market share. He states, "I am obviously disappointed not being selected, but I'm not disappointed to have respected our limit of return and acceptable return for Boralex."

This statement carries far more weight than a typical executive platitude. It signals a deliberate move away from the highly competitive U.S. solar market, where margins are being squeezed by a confluence of factors, including rising balance-of-plant costs and the uncertainty surrounding domestic solar panel sourcing in the wake of new tariffs imposed on Chinese imports.

Decostre's emphasis on discipline hints at a calculated risk assessment. While the U.S. market offers sheer volume, the price pressures are intense, particularly for solar projects. By contrast, Canada presents a more favorable landscape. Boralex already holds a strong position in Quebec, having secured two 315-megawatt projects in Hydro-Quebec's recent RFP. Ontario, facing an impending energy shortfall before 2030, is actively pursuing wind, solar, and storage projects, with Boralex already establishing a foothold in the province's nascent battery storage market.

This shift is further evidenced by Decostre's comments on resource allocation. When asked about future development spending in the U.S., he focuses on optimizing existing assets in Texas and New Mexico, rather than pursuing new projects. He explicitly states, "We are looking to allocate our development resource cost—cash and people—to today's jurisdiction [Canada] more than we expect two years ago."

The numbers tell a compelling story. While the Q1 2024 combined EBITDA saw a healthy 14% growth year-over-year, driven by strong wind and hydroelectric production in North America, Boralex's growth trajectory in Canada is poised to accelerate. The upcoming federal Investment Tax Credit (ITC) legislation is expected to be finalized in June 2024, significantly boosting the returns on Boralex's Canadian projects.

Furthermore, Boralex's strategic partnerships with First Nations communities in Ontario, coupled with its early mover advantage in battery storage, position the company to capitalize on the province's ambitious energy procurement plans. The company's commitment to these partnerships is a key differentiator in Ontario's RFP process, offering non-price advantages that outweigh the sheer scale of international players.

It's worth noting that Boralex's strategic shift isn't merely a response to market conditions. It's an astute recognition of the company's core strengths. Boralex excels in complex regulatory environments, adeptly navigating the nuances of local partnerships and community engagement. These capabilities are particularly valuable in the Canadian market, where relationships with indigenous communities and local stakeholders are crucial for project success.

Combined EBITDA Growth (Year-over-Year)

This chart, derived from Boralex's earnings call transcripts, illustrates the company's EBITDA growth, with a projected increase for Q1 2024.

This strategic realignment has the potential to reshape the North American renewables landscape. While larger, more visible players grapple for market share in the U.S., Boralex is laying the groundwork for sustained, high-return growth in Canada. The company's focus on long-term contracts, coupled with its disciplined approach to development, provides a solid foundation for predictable cash flows and attractive shareholder returns. As Decostre confidently states, "There is more to come, and we are preparing for the LT2 to continue in Ontario."

The quiet giant is awakening, and its sights are set on becoming a dominant force in Canadian renewables.

"Fun Fact: Boralex is a pioneer in partnering with First Nations communities on renewable energy projects. The company's partnership with the Six Nations of the Grand River Development Corporation for Ontario's largest battery energy storage system is a testament to its commitment to community engagement and responsible development."